Exhibit 10.1


 


FIRST LOAN MODIFICATION AGREEMENT


 


This First Loan
Modification Agreement (this “Loan Modification Agreement”) is entered into as
of August 5, 2008, by and among (a) SILICON
VALLEY BANK, a California corporation, with its principal place of business
at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan
production office located at One Newton Executive Park, Suite 200, 2221
Washington Street, Newton, Massachusetts 02462 (“Bank”) and (b) NETWORK ENGINES, INC., a Delaware
corporation, with offices at 25 Dan Road, Canton, Massachusetts 02021 (“Network”),
and ALLIANCE SYSTEMS, INC., a Texas
corporation with offices at 3501 East Plano Parkway, Suite 100, Plano,
Texas 75074 (“Alliance”) (Network and Alliance are individually and collectively,
jointly and severally, “Borrower”).


 


1.             DESCRIPTION OF
EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness and
obligations which may be owing by Borrower to Bank, Borrower is indebted to
Bank pursuant to a loan arrangement dated as of October 11, 2007,
evidenced by, among other documents, a certain Loan and Security Agreement
dated as of October 11, 2007, between Borrower and Bank (as amended, the “Loan
Agreement”).  Capitalized terms used but
not otherwise defined herein shall have the same meaning as in the Loan
Agreement.


 


2.             DESCRIPTION OF
COLLATERAL.  Repayment of the
Obligations is secured by the Collateral as described in the Loan Agreement
(together with any other collateral security granted to Bank, the “Security
Documents”).


 


Hereinafter, the Security
Documents, together with all other documents evidencing or securing the
Obligations shall be referred to as the “Existing Loan Documents”.


 


3.             DESCRIPTION OF
CHANGE IN TERMS.


 


A.                                   Modifications
to Loan Agreement.


 


1                                          The
Loan Agreement shall be amended by deleting the following text appearing in Section 2.1.2(a) thereof:


 


“The face amount of
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve) may not exceed Fifteen Million Dollars
($15,000,000.00), inclusive of Credit Extensions relating to Sections 2.1.3 and
2.1.4.”


 


and inserting in lieu
thereof the following:


 


“The face amount of
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve) may not exceed Ten Million Dollars
($10,000,000.00), inclusive of Credit Extensions relating to Sections 2.1.3 and
2.1.4.”


 


2                                          The
Loan Agreement shall be amended by deleting the following text appearing in Section 2.1.3
thereof:


 


“FX Forward Contracts
shall have a Settlement Date of at least one (1) FX Business Day after the
contract date and shall be subject to a reserve of ten percent (10%) of each
outstanding FX Forward Contract in a maximum aggregate amount equal to One
Million Five Hundred Thousand Dollars ($1,500,000.00) (the “FX Reserve”), inclusive of Credit Extension
relating to Sections 2.1.1, 2.1.2 and 2.1.4. 
The aggregate amount of FX Forward Contracts at any one time may not
exceed ten (10) times the amount of the FX Reserve and the aggregate
amount of FX Forward Contracts may not exceed Fifteen 


 

















 


Million Dollars
($15,000,000.00), inclusive of Credit Extensions relating to Sections 2.1.1,
2.1.2 and 2.1.4.”


 


and inserting in lieu
thereof the following:


 


“FX Forward Contracts
shall have a Settlement Date of at least one (1) FX Business Day after the
contract date and shall be subject to a reserve of ten percent (10%) of each
outstanding FX Forward Contract in a maximum aggregate amount equal to One
Million Dollars ($1,000,000.00) (the “FX
Reserve”), inclusive of Credit Extension relating to Sections 2.1.1,
2.1.2 and 2.1.4.  The aggregate amount of
FX Forward Contracts at any one time may not exceed ten (10) times the
amount of the FX Reserve and the aggregate amount of FX Forward Contracts may
not exceed Ten Million Dollars ($10,000,000.00), inclusive of Credit Extensions
relating to Sections 2.1.1, 2.1.2 and 2.1.4.”


 


3                                          The
Loan Agreement shall be amended by deleting the following appearing as Section 2.2
thereof in its entirety:


 


“              2.2          Overadvances.  If, at any time, the Credit Extensions under
Sections 2.1.1, 2.1.2, 2.1.3 and 2.1.4 exceed the lesser of either (a) the
Revolving Line or (b) the Borrowing Base, Borrower shall immediately pay
to Bank in cash such excess.”


 


and inserting in lieu
thereof the following:


 


“              2.2          Overadvances.  If, at any time, the Credit Extensions under
Sections 2.1.1, 2.1.2, 2.1.3 and 2.1.4 exceed the Revolving Line, Borrower
shall immediately pay to Bank in cash such excess.”


 


4                                          The
Loan Agreement shall be amended by deleting the following text appearing in Section 2.4
thereof:


 


“If this Agreement is terminated on or prior to the date that is one (1) year
from the Effective Date (A) by Bank in accordance with clause (ii) in
the foregoing sentence, or (B) by Borrower for any reason, Borrower shall
pay to Bank a termination fee in an amount equal to Seventy-Five Thousand
Dollars ($75,000.00) (the “Early Termination Fee”).”


 


and inserting in lieu
thereof the following:


 


“If this Agreement is terminated on or prior to the date that is one (1) year
from the Effective Date (A) by Bank in accordance with clause (ii) in
the foregoing sentence, or (B) by Borrower for any reason, Borrower shall
pay to Bank a termination fee in an amount equal to Fifty Thousand Dollars
($50,000.00) (the “Early Termination Fee”).”


 


5                                          The
Loan Agreement shall be amended by deleting the following appearing as Section 5.3
thereof in its entirety:


 


“              5.3          Accounts
Receivable.  For any Eligible
Account in any Borrowing Base Certificate, all statements made and all unpaid
balances appearing in all invoices, instruments and other documents evidencing
such Eligible Accounts are and shall be true and correct and all such invoices,
instruments and other documents, and all of Borrower’s Books are genuine and in
all material respects what they purport to be. 
All sales and other transactions 


 

















 


underlying or giving rise
to each Eligible Account shall comply in all material respects with all
applicable laws and governmental rules and regulations.  Borrower has no knowledge of any actual
Insolvency Proceeding of any Account Debtor whose accounts are an Eligible
Account in any Borrowing Base Certificate. 
To the best of Borrower’s knowledge, all signatures and endorsements on
all documents, instruments, and agreements relating to all Eligible Accounts
are genuine, and all such documents, instruments and agreements are legally
enforceable in accordance with their terms.”


 


and inserting in lieu
thereof the following:


 


“              5.3          Intentionally
Deleted.”


 


6                                          The
Loan Agreement shall be amended by deleting the following text appearing as Section 6.2(b) thereof
in its entirety:


 


“              (b)           Within twenty (30) days after the last day
of each month, if an Advance is outstanding as of the last day of such month,
deliver to Bank a duly completed Borrowing Base Certificate signed by a
Responsible Officer, with aged listings of accounts receivable (by invoice
date).”


 


and inserting in lieu
thereof the following:


 


“              (b)           Within thirty (30) days after the last day
of each month, if an Advance is outstanding as of the last day of such month,
deliver to Bank aged listings of accounts receivable (by invoice date).”


 


7                                          The
Loan Agreement shall be amended by deleting the following text appearing as Section 6.7(b) thereof
in its entirety:


 


“              (b)           Operating Cash Flow.  Operating Cash Flow of at least (i) One
Million Five Hundred Thousand Dollars ($1,500,000.00) for the quarter ending December 31,
2007, (ii) Five Hundred Thousand Dollars ($500,000.00) for the quarter
ending March 31, 2008, (iii) One Million Five Hundred Thousand
Dollars ($1,500,000.00) for the quarter ending June 30, 2008, and (iv) Two
Million Dollars ($2,000,000.00) for the quarter ending September 30, 2008
and as of the last day of each quarter thereafter.”


 


and inserting in lieu
thereof the following:


 


“              (b)           Operating Cash Flow.  Operating Cash Flow of at least (i) $1,500,000.00
for the quarter ended December 31, 2007, (ii) $500,000.00 for the
quarter ended March 31, 2008, (iii) $3,000,000.00 for the twelve (12)
month period ending September 30, 2008, (iv) $1,000,000.00 for the twelve
(12) month period ending December 31, 2008, (v) ($600,000.00) for the
twelve (12) month periods ending March 31, 2009 and June 30, 2009, (vi) $1.00
for the twelve (12) month period ending September 30, 2009, (vii) $1,000,000.00
for the twelve (12) month period ending December 31, 2009, and (viii) $2,000,000.00
for the twelve (12) month period ending March 31, 2010 and for the twelve
(12) month period ending on the last day of each quarter thereafter.”


 


8              The
Loan Agreement shall be amended by deleting the following definitions,
appearing in Section 13.1 thereof:


 

















 


“              “Availability Amount” is (a) the lesser of (i) the
Revolving Line or (ii) the Borrowing Base minus (b) the amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit) plus an amount equal to the Letter of Credit Reserves, minus (c) the
FX Reserve, and minus (d) the outstanding principal balance of any
Advances (including any amounts used for Cash Management Services).”


 


“              “Current Liabilities” are all obligations
and liabilities of Borrower to Bank, plus, without duplication, the aggregate
amount of Borrower’s Total Liabilities that mature within one (1) year.”


 


“              “Operating Cash Flow” is, for each quarter, (a) Borrower’s
consolidated EBITDA, minus (b) Borrower’s consolidated capital
expenditures.”


 


“              “Revolving Line” is an Advance or Advances in an aggregate
amount of up to Fifteen Million Dollars ($15,000,000.00) outstanding at any
time.”


 


“              “Revolving Line Maturity Date”  is
October 9, 2008.”


 


and inserting in lieu
thereof the following:


 


“              “Availability Amount” is (a) the Revolving Line, minus (b) the
amount of all outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit) plus an amount equal to the Letter of Credit Reserves, minus
(c) the FX Reserve, and minus (d) the outstanding principal balance
of any Advances (including any amounts used for Cash Management Services).”


 


“              “Current Liabilities” are all obligations and
liabilities of Borrower to Bank and all of Borrower’s Included Indebtedness,
plus, without duplication, the aggregate amount of Borrower’s Total Liabilities
that mature within one (1) year.”


 


“              “Operating Cash Flow” is, for each quarter, (a) Borrower’s
consolidated EBITDA, minus (b) Borrower’s consolidated capital
expenditures, minus (c) Borrower’s cash taxes.”


 


“              “Revolving Line” is an Advance or Advances in an aggregate
amount of up to Ten Million Dollars ($10,000,000.00) outstanding at any time.”


 


“              “Revolving Line Maturity Date”  is
                        ,
2010 [DATE THAT IS 24 MONTHS AFTER THE DATE OF THE LOAN MODIFICATION
AGREEMENT].”


 


9                                          The
Loan Agreement shall be amended by inserting the following new definition,
appearing alphabetically in Section 13.1 thereof:


 


“              “Included  Indebtedness”
is (a) indebtedness for borrowed money, (b) obligations evidenced by
notes, bonds, debentures or similar instruments, and (c) capital lease
obligations.”


 


10                                    The
Loan Agreement shall be amended by deleting the following definitions,
appearing in Section 13.1 thereof:


 

















 


“              “Borrowing Base” is (a) Five Million Dollars, plus (b) eighty
percent (80.0%) of Eligible Accounts, as determined by Bank from Borrower’s
most recent Borrowing Base Certificate; provided, however, that Bank may
decrease the foregoing percentages in its good faith business judgment based on
events, conditions, contingencies, or risks which, as determined by Bank may
adversely affect Collateral.”


 


“              “Borrowing Base Certificate” is that certain certificate in
the form attached hereto as Exhibit C.”


 


“              “Eligible Accounts” are Accounts which arise in the ordinary
course of Borrower’s business that meet all Borrower’s representations and
warranties in Section 5.3.  Bank
reserves the right, at any time and from time to time after the Effective Date,
to adjust any of the criteria set forth below and to establish new criteria in
its good faith business judgment.  Unless
Bank agrees otherwise in writing, Eligible Accounts shall not include:


 


(a)           Accounts for which the
Account Debtor has not been invoiced;


 


(b)           Accounts that the
Account Debtor has not paid within ninety (90) days of invoice date;


 


(c)           Accounts owing from an
Account Debtor, fifty percent (50%) or more of whose Accounts have not been
paid within ninety (90) days of invoice date;


 


(d)           Credit balances over
ninety (90) days from invoice date;


 


(e)           Accounts owing from an
Account Debtor, including Affiliates, whose total obligations to Borrower
exceed twenty-five percent (25%) of all Accounts (provided that such percentage
shall be fifty percent (50.0%) for
Accounts for which the Account Debtor is EMC) for the amounts that
exceed that percentage, unless Bank approves in writing;


 


(f)            Accounts owing from an
Account Debtor which does not have its principal place of business in the
United States;


 


(g)           Accounts owing from an
Account Debtor which is a federal, state or local government entity or any
department, agency, or instrumentality thereof;


 


(h)           Accounts owing from an
Account Debtor to the extent that Borrower is indebted or obligated in any
manner to the Account Debtor (as creditor, lessor, supplier or otherwise -
sometimes called “contra” accounts, accounts payable, customer deposits or
credit accounts), with the exception of customary credits, adjustments and/or
discounts given to an Account Debtor by Borrower in the ordinary course of its
business;


 


(i)            Accounts for
demonstration or promotional equipment, or in which goods are consigned, or
sold on a “sale guaranteed”, “sale or return”, “sale on approval”, “bill and
hold”, or other terms if Account Debtor’s payment may be conditional;


 


(j)            Accounts for which the
Account Debtor is Borrower’s Affiliate, officer, employee, or agent;


 

















 


(k)           Accounts in which the
Account Debtor disputes liability or makes any claim (but only up to the
disputed or claimed amount), or if the Account Debtor is subject to an
Insolvency Proceeding, or becomes insolvent, or goes out of business;


 


(l)            Accounts owing from an
Account Debtor with respect to which Borrower has received deferred revenue
(but only to the extent of such deferred revenue);


 


(m)          Accounts owing from an
Account Debtor with respect to which Borrower maintains a reserve in connection
with Borrower’s provision of a right of return to the Account Debtor (but only
to the extent of such reserve);


 


(n)           Accounts for which Bank
in its good faith business judgment determines collection to be doubtful; and


 


(0)           other Accounts Bank
deems ineligible in the exercise of its good faith business judgment.”


 


11                                    The
Loan Agreement shall be amended by deleting Exhibit C thereof and
inserting in lieu thereof Schedule 1 hereto.


 


12                                    The
Loan Agreement shall be amended by deleting Exhibit D thereof and
inserting in lieu thereof Schedule 2 hereto.


 


4.             FEES.  Borrower shall pay to Bank a modification fee
equal to Fifteen Thousand Dollars ($15,000.00), which fee shall be due on the
date hereof and shall be deemed fully earned as of the date hereof.  In addition, Borrower shall pay to Bank an
anniversary fee equal to Fifteen Thousand Dollars ($15,000.00) (the “Anniversary
Fee”), which Anniversary Fee shall be earned as of the date hereof, and shall
be payable on the earliest to occur of: (i) August 5, 2009 [DATE THAT
IS 12 MONTHS AFTER THE DATE OF THE LOAN MODIFICATION AGREEMENT]; (ii) the occurrence
of an Event of Default; or (iii) the early termination of the Loan
Agreement.  Borrower shall also reimburse
Bank for all legal fees and expenses incurred in connection with this amendment
to the Existing Loan Documents.


 


5.             PERFECTION
CERTIFICATES.


 


(a)           In  connection with this Loan Modification
Agreement, Network delivered to Bank a perfection certificate signed by Network
(the “Perfection Certificate”).  Network
represents and warrants to Bank that: (i) Network’s exact legal name is
that indicated on the Perfection Certificate and on the signature page hereof;
and (ii) Network is an organization of the type, and is organized in the
jurisdiction, set forth in the Perfection Certificate; and (iii) the
Perfection Certificate accurately sets forth Network’s organizational
identification number or accurately states that Network has none; and (iv) the
Perfection Certificate accurately sets forth Network’s place of business, or,
if more than one, its chief executive office as well as Network’s mailing address
if different, and (v) all other information set forth on the Perfection
Certificate pertaining to Network is accurate and complete.


 


(b)           Alliance hereby
ratifies, confirms and reaffirms, all and singular, the terms and disclosures
contained in a certain Perfection Certificate dated as of October 11,
2007, between Alliance and Bank, and acknowledges, confirms and agrees the
disclosures and information Alliance provided to Bank in the Perfection
Certificate have not changed, as of the date hereof.


 


6.             CONSISTENT
CHANGES.  The Existing Loan Documents
are hereby amended wherever necessary to reflect the changes described above.


 

















 


7.             RATIFICATION OF
LOAN DOCUMENTS.  Borrower hereby
ratifies, confirms, and reaffirms all terms and conditions of all security or
other collateral granted to the Bank, and confirms that the indebtedness
secured thereby includes, without limitation, the Obligations.


 


8.             NO DEFENSES OF
BORROWER.  Borrower hereby
acknowledges and agrees that, as of the date of this Loan Modification
Agreement, Borrower has no offsets, defenses, claims, or counterclaims against
Bank with respect to the Obligations, or otherwise, and that if Borrower now
has, or ever did have, any offsets, defenses, claims, or counterclaims against
Bank, whether known or unknown, at law or in equity, all of them are hereby
expressly WAIVED and Borrower hereby RELEASES Bank from any liability
thereunder.


 


9.             CONTINUING
VALIDITY.  Borrower understands and
agrees that in modifying the existing Obligations, Bank is relying upon
Borrower’s representations, warranties, and agreements, as set forth in the
Existing Loan Documents.  Except as
expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.  Bank’s agreement to modifications to the
existing Obligations pursuant to this Loan Modification Agreement in no way
shall obligate Bank to make any future modifications to the Obligations.  Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Obligations.  It is the intention of Bank and Borrower to
retain as liable parties all makers of Existing Loan Documents, unless the
party is expressly released by Bank in writing. 
No maker will be released by virtue of this Loan Modification Agreement.


 


10.           COUNTERSIGNATURE.  This Loan Modification Agreement shall become
effective only when it shall have been executed by Borrower and Bank.


 


[The remainder of this page is
intentionally left blank]


 

















 


This Loan Modification
Agreement is executed as a sealed instrument under the laws of the Commonwealth
of Massachusetts as of the date first written above.


 


 


	
  BORROWER:

  	
   

  	
  BANK:

  
	
   

  	
   

  	
   

  
	
  NETWORK
  ENGINES, INC.

  	
   

  	
  SILICON
  VALLEY BANK

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ALLIANCE
  SYSTEMS, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
   

  
									



 

















 


Schedule 1


 


EXHIBIT C


 


Intentionally Deleted.


 

















 


Schedule 2


 


EXHIBIT D


 


COMPLIANCE CERTIFICATE


 


	
  TO:

  	
  SILICON VALLEY BANK

  	
  Date:

  	
   

  
	
  FROM:

  	
  NETWORK ENGINES, INC. and ALLIANCE SYSTEMS,
  INC.

  	
   

  	
   

  



 


The undersigned
authorized officer of Network Engines, Inc. and Alliance Systems, Inc.
(individually and collectively, jointly and severally, “Borrower”) certifies
that under the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (the “Agreement”), (1) Borrower is in complete
compliance for the period ending
                              
with all required covenants except as noted below, (2) there are no Events
of Default, (3) all representations and warranties in the Agreement are
true and correct in all material respects on this date except as noted below;
provided, however, that such materiality qualifier shall not be applicable to
any representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, (4) Borrower,
and each of its Subsidiaries, has timely filed all required tax returns and
reports, and Borrower has timely paid all foreign, federal, state and local
taxes, assessments, deposits and contributions owed by Borrower except as
otherwise permitted pursuant to the terms of Section 5.9 of the Agreement,
and (5) no Liens have been levied or claims made against Borrower or any
of its Subsidiaries relating to unpaid employee payroll or benefits of which
Borrower has not previously provided written notification to Bank.  Attached are the required documents
supporting the certification.  The
undersigned certifies that these are prepared in accordance with GAAP
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.  The
undersigned acknowledges that no borrowings may be requested at any time or
date of determination that Borrower is not in compliance with any of the terms
of the Agreement, and that compliance is determined not just at the date this
certificate is delivered.  Capitalized
terms used but not otherwise defined herein shall have the meanings given them
in the Agreement.


 


Please
indicate compliance status by circling Yes/No under “Complies” column.


 


	
  Reporting Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly financial statements with Compliance Certificate

  	
   

  	
  Monthly within 30 days*

  	
   

  	
  Yes No

  	
   

  
	
  10-Q, 10-K and 8-K

  	
   

  	
  Within 5 days after filing with SEC

  	
   

  	
  Yes No

  	
   

  
	
  A/R Agings

  	
   

  	
  Monthly within 30 days (if Obligations are outstanding on last day of
  such month)*

  	
   

  	
  Yes No

  	
   

  
	
  Board Projections

  	
   

  	
  Annually 45 days after FYE

  	
   

  	
  Yes No

  	
   

  



 






*See Section 6.2 of the Loan and
Security Agreement


 


	
  Financial Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Maintain on a Quarterly  Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Adjusted Quick Ratio

  	
   

  	
  1.25:1.0

  	
   

  	
  :1.0

  	
   

  	
  Yes No

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Operating Cash Flow

  	
   

  	
  $

  	
  **

  	
  $

  	
   

  	
  Yes No

  	
   

  



 






**As
set forth in Section 6.7(b) of the Loan and Security Agreement


 

















 


The following financial
covenant analyses and information set forth in Schedule 1 attached hereto are
true and accurate as of the date of this Certificate.


 


The following are the
exceptions with respect to the certification above:  (If no exceptions exist, state “No exceptions
to note.”)


 


 


	
  Network Engines, Inc.

  	
  BANK USE
  ONLY

  
	
  Alliance
  Systems, Inc.

  	
   

  
	
   

  	
  Received by:

  	
   

  
	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
  By:

  	
   

  	
   

  	
  Date:

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Verified:

  	
   

  
	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Compliance Status:         Yes   No

  
											



 

















 


Schedule 1 to Compliance Certificate


 


Financial Covenants of Borrower


 


Dated:


 


In the event of a conflict
between this Schedule and the Loan Agreement, the terms of the Loan Agreement
shall control.


 


	
  I.

  	
   

  	
  Adjusted  Quick Ratio
  (Section 6.7(a))

  	
   

  	
   

  



 


	
  Required:

  	
   

  	
  1.25:1.00

  
	
  Actual:

  	
   

  	
         :1.00

  



 


	
  A.

  	
   

  	
  Aggregate
  value of the unrestricted cash of Borrower

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  Aggregate value of the
  net billed accounts receivable of Borrower

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C.

  	
   

  	
  Quick Assets (the sum
  of lines A through B)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D.

  	
   

  	
  Aggregate value of
  Obligations to Bank

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  E.

  	
   

  	
  Aggregate
  value of liabilities of Borrower (including all Indebtedness) that matures
  within one (1) year and current portion of Subordinated Debt permitted
  by Bank to be paid by Borrower

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  F.

  	
   

  	
  Current
  Liabilities (the sum of lines D and E)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  G

  	
   

  	
  Deferred Revenue

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  H

  	
   

  	
  Line F minus line G

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I.

  	
   

  	
  Adjusted Quick Ratio
  (line C divided by line H)

  	
   

  	
   

  



 


Is
line I equal to or greater than 1.25:1:00?


 


	
   

  	
  o 

  	
   No, not in compliance

  	
  o  Yes, in compliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  II.

  	
   

  	
  Operating Cash Flow (Section 6.7(b))

  	
   

  	
   

  
									



 


	
  Required:

  	
   

  	
  $              (as
  set forth in Section 6.7(b))

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Actual:

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  o 

  	
   No, not in compliance

  	
  o  Yes,
  in compliance